When the UK announced a 50% bonus tax, Alan Howard almost immediately opened an office to allow many of his hedge fund’s, Brevan Howard’s, employees to move out of London to Switzerland.

When the tax went into effect on April 6th requiring anyone earning more than 150,000 pounds to pay 50%, it was almost funny how quickly Alan Howard, whose fund manages more than $30 billion, personally left London for Switzerland.

His firm had been planning on opening a Swiss office since September, and a spokesman for Brevan Howard denied that the reason for the move had anything to do with the tax hike. But the timing of the move coincided perfectly and had the effect on perception as though it had been planned just to avoid the 50% tax.

And for the city of London, who lost a number of top-earners including one of the City’s richest men, the loss means millions of pounds in taxes lost. The pounds lost in taxes from the hedge fund exodus might even mean that any gains the UK might have made from the 50% tax are cancelled out by departures.

The Brevan Howard Geneva office alone can apparently house about 40 employees. So let’s say that, on average, each of those employees earns $10 million (Howard alone earns at least $300 million per year (2% of $30 billion is $600 million), so that’s a fair if not very conservative estimate (another example: Moore Capital star trader, Kaveh Alamouti, 52, took home between £50m and £75m in 2007, according to This is Money).

50 per cent of 10 million dollars 40 times over (40 employees) is $200 million, plus Howard’s ~minimum $150 million per year. That’s $350 million, at least.

Add the 70 hedge funders left from BlueCrest’s London office for Geneva around the same time, and the 2 billion pounds the UK expects to raise from the tax are seriously depleted. And that’s just a couple sections of two hedge funds.

So it’s no wonder that Mayor Bloomberg said that taxing out-of-state resident hedge fund managers extra if they work in New York was the dumbest idea ever.

The high earners whom regulators hope to tax will just leave and find somewhere with lower taxes, and their exodus might end up costing the state however much taxing them would have earned them.

Just look how desperate Connecticut was to get the hedge fund managers to move from New York to CT – these guys’ taxes are in high demand, so they’re (more or less) able to get their way.

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